The FTSE 100’s biggest names are going on-chain, tradeable around the clock by investors in 110 countries. Not one of them can be British. This isn’t crypto building a parallel financial system. It’s crypto quietly rewiring the distribution layer of the existing one, and the incumbents have worked out they’d rather own that than fight it.
In August last year, the World Federation of Exchanges wrote to the SEC, IOSCO and ESMA with a warning. Tokenised stocks, it said, mimic equities without providing the rights or protections of the real thing. The letter used the word “alarmed”.
The WFE is headquartered in London. The London Stock Exchange is a member.
On Tuesday, the London Stock Exchange announced it was launching tokenised stocks.
You can read that as hypocrisy. I think it’s something groundbreaking, and if you look at what was actually announced rather than just the headline, the shape of the next decade of market infrastructure is sitting right there.
What Was Announced
Two things, and almost every write-up has blurred them together. They are not the same, and the difference is the entire story.
The first is the Payward partnership. Payward owns Kraken and built xStocks, a framework for tokenised equities. Over the coming weeks the 100 largest LSEG listed companies will be made available as xStocks: blockchain tokens backed one-for-one by the underlying shares, tradable 24/7, movable into self-custody wallets and DeFi protocols. Investors across more than 110 countries get access. Pending regulatory approval, these will list on LSE 24, the exchange’s new round-the-clock venue, in 2027, with testing starting by the end of the year.
The second is quieter and matters more. LSEG is separately designing its own UK tokenised equity structure, built explicitly to preserve shareholder rights, protections and governance standards. The same technology. Completely different legal object.
A tokenised equity, if you’re new to the term, is a digital token on a blockchain that represents a share. Whether it represents ownership of that share or merely exposure to its price is the question everything else hangs on, and the two announcements sit on opposite sides of it.
The Split Is The Strategy
Now here’s my read, and it’s the part I am going to ask my editor to push back on because I might be giving LSEG too much credit here.
xStocks are a distribution play. They take FTSE 100 exposure to an audience that already lives on-chain, in countries where buying a London-listed share through conventional channels is tedious, expensive or effectively impossible. That’s a genuine market. It’s also a product, not a share, and the WFE’s criticism lands squarely on it: economic exposure without voting rights, dividends handled by a third party, and real uncertainty about your legal claim if the issuing platform fails. The token tracks the price. It does not make you a shareholder.
The second structure is the actual bet. If LSEG can build a tokenised equity that carries the full bundle of shareholder rights and clears UK regulatory scrutiny, it hasn’t launched a crypto product. It has rebuilt the plumbing of the London market on faster rails, with settlement measured in seconds rather than the two working days the industry has politely tolerated since the fax machine was current technology.
So the strategy is: use the fast, imperfect product to reach the new audience now, while building the proper one behind it. Cynically , that’s regulatory arbitrage with a respectable exit planned. Charitably, it’s the only sequencing that works, because you cannot get institutional approval for something nobody had demonstrated demand for.
I lean charitable, with reservations. But note who eats the risk in the meantime and it isn’t LSEG.
Nobody In Britain Can Buy Them
The detail I keep returning to: xStocks are not currently available to UK-based investors.
Read that again. The London Stock Exchange is tokenising Britain’s largest companies so that people in 110 countries can trade them at three in the morning, and a retail investor in stratford can’t even touch the product. Now make this make sense! British companies, British Exchange, British Regulator, and the one nationality excluded is British.
There are decent reasons though. The FCA has been cautious on cryptoasset promotions to retail investors, and given what UK retail has been sold over the past decade, that caution has earned itself. The exclusion is a feature of the regulatory perimeter, not an oversight.
It still tells you where the growth is presumed to be, and it isn’t here.
Who Wins
LSEG obviously, and there’s a subplot worth noting. Elliot Management disclosed a stake in February and has been pressing for better performance. Nothing focuses an incumbent’s mind on new revenue like an activist on the register. This announcement is, among other things, a growth story told to a shareholder who wanted one.
UK-listed companies win too, at least in theory they do. The London market has spent years watching listings drift to New York, and anything that widens the global investor base is worth a shot. Whether a retail trader in Jakarta buying a synthetic BP token improves BP’s cost of capital is a different question, and I’d guess the honest answer is: eventually, marginally, and not for a while.
Payward wins big. Kraken gets a legitimacy upgrade that no marketing budget could buy. When the exchange that has been running since 1801 puts its name next to yours, the compliance conversation changes tone.
Who Carries the Risk
Retail investors outside the UK, mostly, and they’re the ones with the least protection.
ESMA’s Natasha Cazenave has warned that buyers of tokenised stocks may assume an ownership that doesn’t exist under current structures. That’s the core hazard, and it isn’t hypothetical: if the platform holding the underlying shares fails, what a token holder can actually claim in insolvency is genuinely unclear in most jurisdictions.
There’s a liquidity problem too. Tokenised equity markets remain small and thin, which means spreads widen exactly when you most want to sell. A 2/7 market with weekend liquidity is a market where the exit is narrowest during the hours nobody is watching. Round-the-clock trading is only of benefit if there’s someone on the other side at 4am on a sunday, and there generally isn’t.
And a structural point that nobody seems keen to discuss: fragmenting equity trading across a main market, a 24-hour venue and several blockchains does not obviously improve price formation. It may well worsen it. The traditional exchange’s real product was never trading. It was the concentration of liquidity in one place at one time, which is what makes a price mean something.
Why This Isn’t a Crypto Story
I wrote a few weeks ago that crypto’s likely destiny was absorption rather than replacement: the useful parts becoming infrastructure inside regulated finance rather than a rival to it. This is in fact arriving faster than I expected.
Nobody at LSEG is proposing a parallel financial system. That’s silly talk. They’re changing the distribution layer of the existing one, which is a far less romantic project and a far more consequential one. The revolution promised decentralised finance. What it is delivering is a settlement upgrade for the FTSE 100, sold by a company that has been in continuous operation since before the battle of Trafalgar.
That is not a failure of technology. It’s what happens to every financial innovation that turns out to be genuinely useful. It gets bought.
The East London Angle
Two miles east of Paternoster Square, Canary Wharf has spent a decade positioning itself as the home of British fintech, and Level39 has incubated a good chunk of the company that made tokenised settlement technically possible. The engineering that underpins this announcement was substantially built on E14.
The people who’ll benefit from it live somewhere else.
That’s not a complaint about LSEG specifically, it’s just the pattern. East London builds the infrastructure and hosts the data centres; the returns route to institutional shareholders and, in this case, to retail investors in other countries. Local exclusion from a locally built product is a fairly precise summary of how this borough’s relationship with the City tends to go.
That genuine opportunity here is jobs rather than access. Tokenised market infrastructure needs engineers, compliance specialists and settlement analysts, and those roles will be filled from the fintech corridor that runs from Old Street to the Docks. That’s worth more to this area than being allowed to buy a synthetic Shell token at midnight.
What I Think Happens
Now the fun part. Prediction time. LSE 24 launches roughly on schedule in 2027 and initial volumes disappoint, because they always do, and commentators declare tokenisation overhyped. That verdict will be wrong, and the reason is the second structure, not the first.
Within three years, I’d expect at least one major European exchange to run genuine rights-carrying tokenised equities as a standard listing option, with settlement in seconds. The xStocks-style synthetic products will either be regulated into carrying real rights or quietly wound down after the first insolvency demonstrates what token holders actually own. My money’s on the first, but the second would be more instructive.
And UK retail access arrives late, cautiously, and only after somebody else has absorbed the losses that establish where the rules should sit. That’s how British financial regulation has always worked, and honestly, given the alternative, it’s not the worst system.
The oldest exchange in the world just conceded that crypto kids had a point about settlement speed. It only took 225 years and an activist investor.
